When he’s not riding through Chile’s mountains and deserts on his motorbike, Bci Asset Management’s Roberto de la Carrera is steering his clients’ investments to stable returns. He tells Michelle Abrego why ETFs are his prime target and explains how he’s looking to bring Chile’s growing opportunities to a global investor audience
Winning can be an infectious feeling. Bci Asset Management’s Roberto de la Carrera caught the investment bug many years ago, when he took part in a competition at university. The students were challenged to build a portfolio to beat a benchmark – or at least their classmates’ picks – and de la Carrera did just that. The rest is history. ‘I think it definitely spurred me on to pursue that industry,’ he says.
Today he leads the $8 billion asset management division of one of Chile’s largest banks, Banco de Credito e Inversiones (Bci), and has spent more than half of his 30-year career with the firm as its CIO.
Bci Asset Management has a presence in Brazil, China, Spain, Mexico, Peru and Colombia. It recently expanded toward the US too, through the acquisition of City National Bank of Florida in 2015. But de la Carrera recalls that when he joined Bci in 2002, the business and Chile’s capital markets were much smaller and far more locally focused than they are today.
‘The norms of the industry have been changing. Clients have been educating themselves. That has allowed asset managers to be more transparent and permitted them to generate more appropriate products for clients,’ de la Carrera says. Reforms to allow investment abroad have helped Chile become accepted in an international context, he adds.
International markets may catch his eye at work, but when it comes to his obsession – off-road motorbiking – de la Carrera looks no further than his homeland to get in touch with nature.
‘It’s been a passion for more than 30 years. It’s a form of contact with Chile… The landscape invites you to travel – there’s Patagonia, sea, mountains, desert, plains. It’s a wonder.’
His love for Chile plays into his investment strategy too. ‘We probably allocate 10% to 11% of an equity portfolio to Chile, whereas global indices might have about 1%,’ he explains.
‘Chile could have an important upside. In the past few years we’ve gone through a rough economic cycle. The stock market has somewhat maintained itself, rising as flows come to the region.’
Aside from the political issues that might shake things up – Chile’s national elections in November prime among them – de la Carrera believes that the economy could experience near ‘double-digit expansion.’
‘We believe that the market has its own fundamentals that could justify new upsides,’ he says. ‘These include the copper market, which has improved its long-term prospects due to the shortage of new supply that could unlock future investment projects. This could re-establish economic activity and have other positive consequences for domestic demand.’
He also sees Chilean companies improving their margins; a change which would be further reinforced by a set of positive election results and another spurt of economic expansion.
‘In general, in the medium term, there are conditions which will see Latin America sustain its growth as a great commodities producer. Its economies have advanced through improved fiscal and monetary policy. There’s a great opportunity now that interest rates are lowering and there’s scope to get better financing too.’
As CIO, de la Carrera is responsible for forming the strategy and developing new products to add to the business’s line-up of 50 funds.
The firm’s most popular products are its eight model portfolios, which use both their own funds and third-party vehicles.
Since February 2013, their assets under management have increased more than eight-fold, from less than $100 million to $855 million. According to de la Carrera, this represents 21% of the market share, placing Bci second among Chile’s asset managers, behind Santander Chile on 23.1%.
The model portfolios range from fixed income-focused funds with little international exposure to funds of funds with up to 80% invested in global equity. These are available to retail clients as well as more affluent private banking clients and family offices.
‘The retail funds of funds have had a lot of success because clients value the investment diversification and they don’t have to be on top of those investment decisions day after day. For a good price they can have a portfolio that moves about once a month – that’s the concept,’ de la Carrera says.
His team of 35 analysts and portfolio managers are the ones behind the firm’s asset allocation and fund selection process. Their work is governed by a ‘very disciplined’ investment process, which is reviewed monthly when the investment committee meets to decide the firm’s asset allocation view.
For de la Carrera, this process is key. ‘We’ve invested a lot of time and energy in this area because we think it’s the motor of our company.’
This professionalism has even caught the attention of Fitch, which has rated the Chilean firm as having the ‘highest standards’ for two years running – the best international risk rating available for an asset manager.
Once the asset allocation team has their strategy approved by the investment committee, it falls to the fund selection team to put the portfolio together.
One of the firm’s fund selection filters is the Comisión Clasificadora de Riesgo’s (CCR) list. The CCR is the Chilean risk regulator that greenlights funds for the country’s six AFPs to invest in. While asset managers are not bound by the CCR’s rules, de la Carrera says it’s important to consider the list’s recommendations.
His team looks for managers with a track record of at least five years, consistency over time, and a clear ability to maintain their performance. Managers must also be credible custodians and should have no black marks against their reputations.
Bci’s fund selectors, who have access to the UBS and Allfunds investment platforms as well as their own arsenal of funds, review the manager universe at least once a month as part of this process.
Building a Global Business
In December 2016, Bci’s investment arm launched the Forum One Latin American Corporate Credit Investment Grade fund, in partnership with global asset manager Edmond de Rothschild. It currently has $280 million in assets under management, which de la Carrera says is the largest of its type for a local player.
‘We’re a bank that is catering to all client segments: retail, affluent, private banking and institutional,’ he says. ‘This year we’re also looking to export our capabilities in the asset classes that we have expertise in, such as Latin American fixed income and Latin American equity.’ He’s looking further afield for the future too. ‘In a world where returns are low, Latin America is offering good returns. The world is looking to Latin America and we have to demonstrate our expertise. We’ve covered our local market and our aspiration is to sell our regional competitive advantage to Europe.’
Closer to home, financial services groups and investors alike are sizing up Argentina as the country looks to rebuild its capital markets and wealth industry, and de la Carrera says that his group is considering its options. ‘We’re looking at launching Argentine products, but Argentina is a very small market. There are few fixed income issuers, just as there are few listed companies. Its capital markets have to make some progress.’
Asset allocation is now more important than fund picking in liquid markets, de la Carrera says. He describes how Bci’s team places greater emphasis on the former where it sees an opportunity. ‘Even more so when there’s a passive way to enter that market, because passives are generally cheaper,’ he adds.
‘In markets where there’s a large number of ETFs, we prefer to use the ETFs because over the past few years we’ve seen it become more difficult to deliver alpha in very liquid markets.’
ETFs because over the past few years we’ve seen it become more difficult to deliver alpha in very liquid markets.’
For example, his team uses mostly ETFs for its exposure to the US, including the Vanguard US Total Stock Market, the iShares Core S&P 500 Ucits ETF and the SPDR Trust ETF, which track the S&P 500 and feature throughout Bci’s range of model portfolios.
In nearly all equity portfolios, de la Carrera says the US would likely make up 50% of the allocation.
‘We’re just looking to replicate the market, as it promises to have a superior performance. However, we’ve seen lots of distortion in specific sectors. For example, there were lots of expectations for the financial sector that we’ve yet to see happen,’ he says. Donald Trump’s expected push for deregulation, for instance, has failed to materialize so far.
The firm also uses the Wells Fargo WF US Short Term High Yield as part of its bond play in the US market.
ETFs make up the bulk of the model portfolios’ exposure to Europe, through the Vanguard European ETF, the iShares MSCI EMU Index and the WisdomTree Europe Hedged Equity ETF.
‘Our allocation to Europe is broad. It’s hard to find funds that are differentiated, or to find good managers country by country, so in the end we look to replicate the market via ETFs,’ de la Carrera says.
‘The retail funds of funds have had a lot of success because clients value the investment diversification and they don’t have to be on top of those investment decisions day after day’
However, the DWS Deutschland and the GAM Star Continental European Equity funds feature in a number of portfolios, including one of Bci’s more aggressive model portfolios – the $26 million Global Dynamic 80, which is 80% invested in equities.
The team at Bci has been upping its allocation to Europe, as fears of rising populism in the area evaporate and as the European Central Bank makes increasingly proactive moves, including facilitating Santander’s rescue of Banco Popular in June.
Turning to Asia, de la Carrera says he is backing India to be a growth driver through the iShares MSCI India ETF, which makes up around 15% of their allocation to the region.
‘India is heading in the right direction,’ he says. ‘Its investment needs are significant but its central bank is doing a good job of moderating its rapid growth as it becomes much stricter. [Prime minister Narendra Modi] is also doing a good job of moderating.’
However, he explains that he is hesitant to invest in China until after the 19th National Congress of the Communist Party later this year, as the majority of its top decision-makers are expected to retire, making way for new leadership.
For its Asia exposure, the firm uses the iShares MSCI Asia Ex-Japan ETF and the Matthews Asia Funds Pacific Tiger strategy. In emerging market bonds, the group uses the Julius Baer Local Emerging Bond fund.
Its nine model portfolios have helped Bci Asset Management stand out among its competitors, and de la Carrera believes that making sure clients are sold the right products has been the key to success. Finding the right fit is what keeps him motivated day to day.
‘I love what I do: searching for investment opportunities, product creation. I try to keep in permanent contact with customers so that I can capture their needs, and from that increase the value we bring them.’
Roberto de la Carrera
2002 - present
Bci Asset Management, CIO
1996 - 2002
Santiago Corredores de Bolsa, managing director
1995 - 1996
Banco de Santiago, director of financial management
1992 - 1995
Banco de Santiago, deputy director of financial management
1990 - 1992
Banco de Santiago, money desk operator
1989 - 1990
Larraguibel, Munita y Cruzat, deputy director